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End of an era, as eBay drops PayPal as main payments processor

eBay is to drop PayPal as its main payments processor, in a move it says will benefit both sellers and buyers on the platform. While consumers using the auction service will still be able to pay using PayPal until at least 2023, eBay has signed an agreement with Dutch payments firm Adyen that will see payments processing brought in-house.

PayPal was spun off from eBay in 2015, and the two firms have remained closely linked even afterwards. According to eBay, the new payments processing arrangement will mean that customers can buy items on eBay without leaving its own ecosystem, and sellers will have lower processing costs.

eBay said that it wanted to complete the move as quickly as possible within the terms of its existing deal with PayPal, and that the operating agreement it had in place "has not been extended and it will not be extended". In the aftermath of the news, PayPal shares dropped seven per cent in pre-market trading in the US.

"As a leading global commerce company, eBay believes that payments intermediation is strategically important to improve the buyer and seller experience on its platform and will enable the company to further innovate on behalf of its customers," said a eBay spokesperson in a blog post announcing the change.

"Over the past three years, eBay has transformed its business to drive the best choice, most relevance and most powerful selling platform. Building out eBay's payment capabilities is the next step in the company's strategy, with the goal of driving significant benefits and efficiences for its buyers and sellers globally."

"eBay dropping PayPal as its primary payments provider is a win for consumers and another step in the evolution of the shopping experience," said Scott Lester, CEO of eCommerce optimisation platform Flixmedia. "With most of us now familiar with online shopping, focus has shifted from simply delivering a great customer journey to how to deliver the best customer journey. Personalisation and product discovery have been souped-up as a result, but less attention has been paid to the far less sexy arena of payments.

"Offering a greater choice of payments options for consumers, an integrated checkout which doesn't disrupt and divert the shopping experience, and low - or no - processing fees are now major points of differentiation.

"More of us are shopping on smartphones, meaning more of us will be frustrated by the difficulty of paying for items on our devices. eBay has set the tone for 2018 and beyond, with improvements and investments in payments technology becoming a vital component of success in the retail industry."